Vehicle price guides have been an invaluable resource for dealers and buyers for nearly a century.
Back when there was no such thing as real-time market data, pricing guides were the only resource available to gauge a vehicle’s price accurately and consistently.
Today, vehicle pricing guides continue to serve both dealers and buyers as freely accessible digital tools. Car buyers use pricing guides to know the value of vehicles for purchases and trade-ins. Dealers, despite having more sophisticated pricing and appraisal tools, can still use the books to double check vehicle values and build common ground with the customer.
What is Kelley Blue Book?
Kelley Blue Book (KBB) is the oldest and most recognizable vehicle price guide in the US. The first edition was distributed in 1926 and quickly became the country’s preferred automotive resource.
Today, KBB is a comprehensive online platform that allows dealers, consumers, and financial organizations to explore and research the enormous automotive market. Users can pull accurate data for any vehicle and get fine-tuned valuations down to the trim level and specific features.
In addition to cars, KBB offers pricing for motorcycles, boats, snowmobiles, and RVs. Consumers can tap into a vast library of content, reviews, research tools, and finance calculators.
Kelley Blue Book is the industry’s most popular resource for vehicle prices.
What are NADAguides?
The National Automobile Dealers Association has maintained their own database of vehicle prices for nearly as long as KBB. The first edition of NADAguides (Pronounced N-A-D-A Guides) was published in 1933, and hard copies of the guide are still distributed today.
Similar to KBB, NADAguides has also developed an online portal where users can browse cars, motorcycles, RVs, boats, classic cars, and even manufactured homes. NADAguides also features several consumer-focused tools to help them research, compare and discover vehicles based on their preferences.
Millions of car buyers and dealerships rely on NADAguides for accurate vehicle prices and reliable services.
Comparing KBB and NADAguides
Let’s examine both pricing guides side-by-side and see what unique benefits they offer.
First, the similarities:
- New and Used Markets. Both tools work for new and used car markets as well as powersport vehicles and other miscellaneous markets.
- User Experience. KBB and NADAguides offer an almost identical user experience. On both sides, you can refine your search by year, body types, brands, models, trim level, features, and location.
- Integration. Both tools integrate with popular dealer software solutions, including DealerCue. This allows dealers to cross-reference data from multiple sources and compare using book values as a common metric.
- Financial Institutions. KBB and NADAguides are used and required by financial institutions when calculating car loans.
- Popularity with Consumers. Both guides are used extensively by car buyers in their research phase.
Now let’s look at a few of the key differences, starting with the requirements of financial institutions:
Financial Institutions: NADA in the East and Midwest, KBB on the West Coast
KBB and NADA are so well-trusted that banks, credit unions, and other financial institutions require their valuations for car loans.
Lenders use vehicle valuations to calculate the size of the loan and the interest rate. However, depending on their location, some financial institutions require NADAguides while others require KBB.
The general rule of thumb is this: Financial institutions in the Midwest and on the East Coast require NADA prices. Those on the West Coast need valuations from Kelley Blue Book.
As a dealer, it is your responsibility to make sure your customer has the right vehicle valuation. Dealers should check with their local banks and credit unions and make sure they are using the right pricing book.
Differing Calculation Methods
Kelley Blue Book and NADAguides aggregate data from different sources, which ends up affecting their final valuations. Generally, NADAguide valuations are higher than KBB prices, but that is not always the case.
KBB and NADAguides use different algorithms to weigh the influence of pricing factors, including:
- Source of purchase
KBB was the first pricing book to add mileage as a factor for used vehicles. They also offer different prices depending on the source of the vehicle:
- Third Party/Private. If buying from a third party, KBB asks users to add the mileage and choose one of four condition states: Fair, Good, Very Good, and Excellent. Buyers will get a Fair Market Range, or the range of prices found on the market.
- Dealership. If buying from a dealership, KBB will assume the vehicle is in “Good” condition or better. Buyers will still get Fair Market Range as well as the typical (or average) listing price for the same vehicle.
- Certified from a Dealer. Buyers can also choose to buy certified used vehicles, which KBB assumes are in “Very Good” condition or better. Not surprisingly, certified used vehicles cost considerably more than non-certified cars.
Below you can see the different valuations for a used 2015 Audi Q3 SUV when purchased from a dealership, as a certified used vehicle, and from a private party.
NADAguides uses a 3-condition scale and offers corresponding prices:
- Rough trade-in price
- Average trade-in price
- Clean trade-in price
It’s up to dealers and consumers to correctly categorize the vehicle’s condition.
Like KBB, NADAguides assumes that vehicles from dealerships are in good condition. Thus, retail vehicles only get a “clean” price.
NADA calculates a base price for each vehicle and trim level. Then, the system factors in mileage and options inputted by the user. The final price is printed on the bottom of the table.
A certified pre-owned (CPO) price is also calculated based on the retail price.
As you see from both screenshots, NADA’s price is over $1,000 higher than KBB’s for the same vehicle with the same mileage and condition.
Which Pricing Guide is Best for Dealers?
Is there a “best pricing book” for dealers? Not exactly, but individual dealers can add up the factors to determine the right book for them. Here are a few factors to consider when making your decision.
While KBB and NADAguides are valuable resources, dealers shouldn’t appraise vehicles based solely on pricing guides.
DealerCue published a 3-part series called “Is Your Dealership Beholden to the Books?”. In these articles, we discuss why book values do not reflect the true market pricing in real-time. Dealerships beholden to the books might be making less accurate appraisals, which means they are leaving money on the table.
To learn more, read the entire series here:
- Is Your Dealership Beholden to the Books? – Part 1
- Is Your Dealership Beholden to the Books? – Part 2
- Is Your Dealership Beholden to the Books? – Part 3
Instead of relying on pricing books, dealers should invest in a pricing and appraisal tool that aggregates real-time market data.
What Do Your Customers Use?
The other factor to consider is which books your customers use.
Car buyers have a ton of information at their fingertips. Both NADAguides and Kelley Blue Book are free to the general public and any buyer can use them check vehicle prices. Combined with various online listings, customers can reliably gauge the price range of their vehicle. This is true for both trade-in and retail prices.
The problem dealers face is: Which book have the buyers checked?
Let’s say a customer wants to trade in their 2015 Audi Q3 for a newer model. They have checked the NADAguides valuation and expect $21,350 for their car. However, you offer them a trade-in price closer to KBB’s value at around $18,000. That’s a pretty big difference.
While you can argue with the customer on why your valuation is more accurate, they won’t care. All they care about is that you’re offering them $3,300 less than what they think they’re due. They will probably shop around for a better price, which your competitors may gladly provide.
That said, there is good news for dealers: KBB is vastly more popular than NADAguides, and KBB’s valuations are generally lower.
Again, the valuations your dealership uses depends on your location. For East Coast and Midwest dealerships, NADAguides are the way to go. West Coast dealerships should rely on KBB.
Which Pricing Book is Right for You?
Kelley Blue Book and NADAguides are the longest-standing and most renowned price guides. They are considered reliable, despite the fact they often produce different valuations.
For dealerships, choosing the right pricing book comes down to personal preference. As far as appraisals are concerned, there are significantly more accurate tools which dealerships should use instead of pricing guides. However, due to requirements by financial providers, you need to use at least one book to assist your customers with securing funding.
The customer perception is another major factor. Dealerships should use values from the book preferred by their customers. Otherwise, they risk alienating customers and deals.
All things considered, many dealers simply use both NADAguides and KBB, depending on the situation. Both are great resources to keep up on market trends, but they shouldn’t be your only pricing tool.